Answered: accounting rate of return on initial…

Business

Accounting

accounting rate of return on initial investment.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Your firm is considering an investment in luxury cars for its livery service between Oxford and CVG airport. The purchase price of the cars is $300,000 and the service is expected to contribute gross profit of $150,000 per year (excluding depreciation) for 3 years. The vehicles will be fully depreciated using straight-line depreciation over 3 years. The cars will be sold at the end of the third year for $75,000. There is no expected impact on NWC, the tax rate is 21%, and the WACC is 10%. What is the NPV of the investment?
A project has to sell a machine that is obsolete. The market department finds a buyer who is willing to pay $100, 000 for the machine. The machine was purchased 4 years ago for $1.1 million. The accounting department notes that the depreciation method for this machine is straight line, and the machine will be depreciated to zero over a five year time period after purchase. What is the machine's after - tax salvage value? Tax rate is 21%. Question 1 options: $1, 635.24 $2, 314.05 $142,000.00 - $2,784.62$289.26
Yoyo, Inc. is considering the purchase of a new machine that will reduce manufacturing costs by P15,000 annually. Yoyo will use MACRS to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for P10,000. The firm expects to be able to reduce net operating working capital by P15,000 when the machine is installed, but required operating working will reduce to its original level when the machine is sold after 5 years. Yoyo's tax rate is 30% and it uses 12% cost of capital. The applicable depreciation rates are 20%, 19%, 12%, 11%, and 6%. If the machine costs P60,000, a. What is the project's NPV b. What is the project's MIRR
Moore & Moore (MM) is considering the purchase of a new machine for $50,000, installed. MM will use the MACRS accelerated method to depreciate the machine, which is classified as 5-year property (see the following MACRS table for depreciation rates). MM expects to sell the machine at the end of its 4-year operating life for $10,000. If MM's marginal tax rate is 40%, what will the after-tax cash flow be when it disposes of the machine at the end of Year 4? Annual depreciation rates for years 1 through 6 are respectively as follows: 20%, 32%, 19%, 12%, 11%, 6%. A. $7,656 B. $8,059 C. $8,484 D. $8,930 E. $9,400
The management of Jasper Equipment Company is planning to purchase a new milling machine that will cost $160,000 installed. The old milling machine has been fully depreciated but can be sold for $15,000. The new machine will be depreciated on a straight-line basis over its 10-year economic life to an estimated salvage value of $10,000. If this milling machine will save Jasper $20,000 a year in production expenses, what are the annual net cash flows associated with the purchase of this machine? Assume a marginal tax rate of 40 percent. a. $15,000 b. $27,000 c. $21,000 d. $18,000
Caradoc Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $410,000 is estimated to result in $150,000 in annual pre-tax cost savings. The press falls into Class 8 for CCA purposes (CCA rate of 20% per year), and it will have a salvage value at the end of the project of $55,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $3,100 in inventory for each succeeding year of the project. If the shop’s tax rate is 35% and its discount rate is 9%. Calculate the NPV of this project.
Caradoc Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $421,000 is estimated to result in $161,000 in annual pre-tax cost savings. The press falls into Class 8 for CCA purposes (CCA rate of 20% per year), and it will have a salvage value at the end of the project of $56,100. The press also requires an initial investment in spare parts inventory of $31,000, along with an additional $4,200 in inventory for each succeeding year of the project. If the shop’s tax rate is 35% and its discount rate is 9%. Calculate the NPV of this project. Round the final answer to 2 decimal places
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